A few days ago I read what I had hoped would be an interesting article in the WSJ about mobile gaming. Instead, the article focused on mobile gaming as a potential new hype epicenter. While I agree that we are in the early stages of mobile gaming adoption, I think the article misses an important point. While there are far more mobile phones in the world than there are iPods, one could argue that the iPod has been much more successful in establishing itself as a platform than the mobile phone has (leaving aside the obvious voice application, where iPods have no play).
So, just to be clear, let’s use a very simple definition of a platform. You are a platform if other people in your environment decide they want to build things (applications, devices, converters, etc.) on top of the product you have built. The mobile phone is clearly a platform — there is a thriving industry of manufacturer-specific add-ons built to enhance the functionality of specific phones. But the iPod is clearly a platform, too. Bose is making home audio products to enhance the functionality of the iPod experience. Even auto manufacturers, which have traditionally been slow to move, have come up with conversion kits to help iPods work better in automobiles. The iPod has done a surprising job of getting partners and applications built around it in a way that mobile phones still haven’t.
There are in excess of 400 million mobile phones out there. There are certainly far fewer iPods. So why have stodgy CE and automobile manufacturers chosen to throw their weight behind this new, emerging product controlled by a single company instead of pushing for more integration in a market with much larger volume and (arguably) far less vendor control? It seems that the gains from getting even a sub 1% share of mobile phone users dwarfs the gains from gettting 100% of iPod users. So what gives? I am not sure I have a good answer, but the most satisfying answer I can find is that Apple’s sole ownership of the platform gives its partners/developers some assurance that the underlying platform is stable and they only need to deal with one entity to guarantee compliance. Contrast this with the mobile phone market. Every manufacturer has its own operating system, connectivity options for its devices, and other unique things that hamper designing a one-size-fits-all device for the mobile phone market (except for headsets).
I still find this answer somewhat unsatisfying given that a device manufacturer could just take a rifle shot at one manufacturer, such as Samsung and Nokia, and do what they can to make their given product compatible with that manufacturer’s products. Again, this would be challenging because even within a given manufacturer’s product line you have a variety of connectivity options, operating systems, and other oddities.
I am beginning to believe that this is why the investment community is having such a hard time figuring out what will work in the mobile space. Everyone looks at the mobile phone unit volumes and says there must be an opportunity there. But when you break down the number of units and take into account that there are various segments (high end vs. low end) and very little consistency among the “guts” within a given manufacturer’s line, you realize that you don’t have one large market — you have a maddening collection of micromarkets, none of which might be large enough to warrant targeting. Add in the fact that the underlying product is rapidly becoming something that people change every 12 months and it becomes a daunting task to address the market.
Thoughts? Email me at blog @ charleshudson.net